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Soybeans shoot higher on dry weather

05/21/2012 @ 3:34pm

U.S. soybean futures climbed Monday, fueled by investors adding risk premium to account for stressful weather.

"Investors are factoring in very nervous weather for newly planted U.S. soybean crops," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.

New crop contracts, or futures that represent soybeans to be harvested in the fall, led the advances. The U.S. Department of Agriculture is using a relatively high crop yield in its estimates for 2012 production, and even that projection leaves the market straddled with precariously tight end-of-year stockpiles by August 2013.

"Based on the lack of rain in some key growing areas of the U.S., early crop development is at stake," Mr. Zuzolo said. "It will be difficult to attain USDA's production forecast if U.S. crops don't have perfect weather," he added.

The Telvent DTN ag weather forecast calls for a trend toward drier weather over southern and eastern areas of the U.S. soybean crop belt. The pattern bears watching as it will deplete soil moisture and increase crop stress. Soil moisture levels already have become quite short in southern Illinois and southeast Missouri, Telvent added.

New crop futures advanced at the expense of contracts for near-term delivery, a sign that investors acknowledge the 2012 crop has little room for any production errors.

Soybeans for July delivery closed up 7 1/2 cents to $14.12 1/2 a bushel, and November soybeans finished 18 1/4 cents higher at $13.06 1/4.

Monday was the first trading under the CME Group's new expanded trading hours for CBOT grain and soy contracts. Trading in the contracts began Sunday at 6 p.m. EDT. The contracts trade on a 21-hour schedule through Friday each week, with electronic trading stopping at 3 p.m.

The official settlement of the contracts remains at the end of open outcry trading at 2:15 p.m. EDT. The extended 45 minutes of trading, resulted in July and November contracts easing by 3 cents from the settlement at 2:15 p.m.

U.S. wheat futures prices perked up Monday as well, extending the market's recent upward trend. Wheat kept rising as concerns remained about dryness in Russia and dry, hot weather forecast in coming days for the southern U.S. Plains. "I think that is enough to keep the stress in place on the crops" and warrant higher a weather premium for futures, said Brian Hoops, president of brokerage Midwest Market Solutions.

Increased global export business reflected by the announced purchase of 100,000 metric tons of U.S. wheat by Iraq provided price support as well.

CBOT July wheat ended 8 3/4 cents higher at $7.04 a bushel, and KCBT July wheat rose 10 cents to $7.15.

U.S. corn futures end mixed, with the spot month July contract stumbling on easing cash basis and slower exports, while new crop contracts were buoyed by weather risks.

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